By Asok Nadhani
Subsidiary Books
Subsidiary Books
8.1
Subsidiary Books
i)
When
volume of transactions increases, recording of all transactions in Journal
becomes inconvenient. To have prompt and accurate information, the journal book
is sub divided into subsidiary books (known as special journals). It facilitates
to save time and device, labour and space and to avoid journal becoming
voluminous. These books are also called Special
Purpose Subsidiary books.
ii) The main type of subsidiary books are-
1.
Cash
Book: To record transactions in cash or by cheques.
2.
Purchase
Day Book: To record credit purchase.
3.
Sales
Day Book: To record credit sales.
4.
Purchase
Return Book: Value of goods returned to supplier.
5.
Sales
Return Book: Value of goods returned by customer.
6.
Bills
Receivable Book: To Record entries for bills receivable.
7.
Bills
Payable Books: To Record entries for bills payables.
8.
Journal
Proper: To record other transactions which are not recorded in any of the above
mentioned books.
9.
Other
Subsidiary Books
8.2 Advantage of subsidiary Books
i)
Due to sub-division of journal, posting of each
entry becomes easy.
ii)
As one type of transaction is recorded in one book,
it is convenient to locate any desired transaction.
iii)
As there are multiple books, the books can be
divided among several persons for entry.
iv)
Efficiency of the employees who maintain such books
can be ascertained.
v)
It is easy to make internal check.
vi)
Each clerk does his work with more care because, if
any mistake or irregularity is noticed in his books, he is held accountable.
vii)
In the court of law, related subsidiary book can be
conveniently produced instead of producing whole of the journal.
viii)
Preliminary record for all entries can be easily
made.
ix)
Owner can, at any stage know the position of
various types of transaction (e.g. sales, purchases) for any period.
8.3 Some Typical Subsidiary
Books
i) Cash Book
ii) Purchase Day Book
iii) Sales Day Book
iv) Purchase Return Book
v) Sales Return Book
vi) Journal Proper
8.3.1 Cash Book
The Cash Book is sub division of the book of original
entry and it records transactions related to receipts or payment of cash or by
cheque only. [Refer Ch.
8.3.2 Purchase Day Book
All credit purchases for tradable goods are primarily
recorded in Purchase book (Credit purchase of assets like machinery, furniture,
stationery, other office use items etc. are recorded in Journal Proper or
Subsidiary Books).
Posting: The total of the book is posted
periodically to the debit side of Purchase Account. Individual amount in the
book is posted to supplier’s individual account as ‘By Purchase A/c’.
Example: Record the following transactions in Purchase Day Book and post them
into ledgers.
|
2009
June 1
|
Purchased from Poddar Electric Co. – 10 Electric Fans @ Rs.800 each,
5 Electric Irons @ Rs.200 each, less trade discount @ 10%
|
|
June 15
|
Purchased from Sony Electric Co.- 20 Electric Heaters @ Rs.300 each,
less trade discount @ 5%
|
Solution:
Purchase
Day Book
|
Date
|
Particulars
|
Invoice
No.
|
L.F
|
Details
(Rs.)
|
Amount
(Rs.)
|
|
2009
June 1
|
Poddar electric Co.
10 Electric Fans
@ Rs.800 each
|
|
|
8,000
|
|
|
|
5 Electric Irons
@ Rs.200 each
|
|
|
1,000
|
|
|
|
|
|
|
9,000
|
|
|
|
Less: Trade
Discount @ 10%
|
|
|
900
|
8,100
|
|
June15
|
Sony Electric Co.
20 Electric
Heaters @ Rs.300 each
|
|
|
6,000
|
|
|
|
Less: Trade Discount @ 5%
|
|
|
300
|
5,700
|
|
|
|
|
|
|
13,800
|
Ledgers:
Poddar electric Co.
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|
Date
|
Particulars
|
L.F
|
Rs.
|
Date
|
Particulars
|
L.F
|
Rs.
|
|
|
|
|
|
June 1
|
By Purchase A/c
|
|
8,100
|
|
Sony
Electric Co.
|
|||||||
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|
Date
|
Particulars
|
L.F
|
Rs.
|
Date
|
Particulars
|
L.F
|
Rs.
|
|
|
|
|
|
June15
|
By Purchase A/c
|
|
5,700
|
|
Purchase
Account
|
|||||||
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|
Date
|
Particulars
|
L.F
|
Rs.
|
Date
|
Particulars
|
L.F
|
Rs.
|
|
June 30
|
To Sundries as
per Purchase Day Book (June 2010)
|
|
13,800
|
|
|
|
|
Note:
Trade Discount is
recorded only in Purchase Day book and not posted in ledges as discussed earlier.
8.3.3 Sales Day Book
All credit sales are primarily recorded in Sales book
(Credit Sale or disposal of assets like machinery, furniture etc. scrap and
other used items are recorded in Journal proper).
Posting: The total of the book is posted
periodically to the credit side of the Sales Account. Individual amount in the
book is posted to Customer’s individual account as ‘To Sales A/c’.
Example: Record the following transactions in Sales
Day Book and post them into ledgers.
|
2009
June 1
|
Sold to Gupta Co. – 10 Electric Fans @ Rs.1,000 each, 2 Electric
Irons @ Rs.350 each, less trade discount @ 10%. Excise Duty is to be charged
@ 10%.
|
|
June 15
|
Sold to NET Pvt. Ltd. - 10 Electric Heaters @ Rs.400 each, less trade
discount @ 5%. Excise Duty is to be charged @ 10%.
|
Solution:
Sales
Day Book
|
Date
|
Particulars
|
Invoice
No.
|
L.F
|
Gross
Amount
(Rs.)
|
Trade
Discount
(Rs.)
|
Excise
Duty
(Rs.)
|
Net
Amount
(Rs.)
|
|
2009
June 1
|
Gupta Co.
10 Electric Fans
@ Rs.1,000 each
|
|
|
10,000
|
|
|
|
|
|
2 Electric Irons
@ Rs.350 each
|
|
|
700
|
|
|
|
|
|
Less: Trade
Discount @ 10%
|
|
|
10,700
|
1,070
|
|
|
|
|
Add: Excise Duty
@ 10% (Note)
|
|
|
|
|
1,070
|
10,700
|
|
June15
|
NET Pvt. Ltd.
10 Electric
Heaters @ Rs.400 each
|
|
|
4,000
|
|
|
|
|
|
Less: Trade Discount @ 5%
|
|
|
|
200
|
|
|
|
|
Add: Excise Duty
@ 10% (Note)
|
|
|
|
|
400
|
4,200
|
|
|
|
|
|
14,700
|
1,270
|
1,470
|
14,900
|
Ledgers:
|
Gupta
Co.
|
||||||||||||||
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|||||||
|
Date
|
Particulars
|
L.F
|
Rs.
|
Date
|
Particulars
|
L.F
|
Rs.
|
|||||||
|
June1
|
To Sales A/c
|
|
10,700
|
|
|
|
|
|||||||
|
NET
Pvt. Ltd.
|
||||||||||||||
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|||||||
|
Date
|
Particulars
|
L.F
|
Rs.
|
Date
|
Particulars
|
L.F
|
Rs.
|
|||||||
|
June15
|
To Sales A/c
|
|
4,200
|
|
|
|
|
|||||||
|
Sales
Account
|
||||||||||||||
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|||||||
|
Date
|
Particulars
|
L.F
|
Rs.
|
Date
|
Particulars
|
L.F
|
Rs.
|
|||||||
|
|
|
|
|
June 30
|
By Sundries as
per Sales Day Book (June 2010)
|
|
14,900
|
|||||||
Note:
Excise Duty is
calculated on list price.
Trade Discount is
recorded only in Sales Day book and not posted in ledges.
Taxes and other charges in Sales or Purchase Day Book:
Sometimes, there may be
additional charges in Sales (like VAT, freight outwards) etc. which need to be
posted in different ledger accounts. In such case, separate columns head are
created for each account and total posted in the respective ledger, to get the
figures for each head separately.
In case of
Purchase, normally the value is posted into Purchase Account. However, in some
cases (like Input VAT), some charges are posted in separate ledger account. In
such cases, the amounts are entered in separate column, to get figures for each
head separately.
Sales Day Book with VAT
VAT is calculated
on net price. The journal entry will be as follows:
|
Sundry Debtors A/c
|
Dr.
|
|
To Sales A/c
|
|
|
To Output VAT A/c
|
|
Example: On June 15, sold to NET Pvt.
Ltd. - 10 Electric Heaters @ Rs.400 each, less trade discount @ 5%. Excise Duty
is to be charged @ 10% on list price. VAT
is charged @ 10% on net sales value.
Sales
Day Book
|
Date
|
Particulars
|
Inv.
No.
|
LF
|
Gross
Amount
(Rs.)
|
Trade
Discount
(Rs.)
|
Excise
Duty
(Rs.)
|
Net
Sales Amount
(Rs.)
|
VAT
10%
(Rs.)
|
Total
Amount
(Rs.)
(Net
+ VAT)
|
|
June
15
|
NET Pvt. Ltd.
10 Electric
Heaters @ Rs.400 each
|
|
|
4,000
|
|
|
|
|
|
|
|
Less: Trade
Discount @ 5 %
|
|
|
|
200
|
|
|
|
|
|
|
Add: Excise Duty
@ 10 %
|
|
|
|
|
400
|
4,200
|
420
|
4,620
|
|
|
|
|
|
4,000
|
200
|
400
|
4,200
|
420
|
4,620
|
Ledgers
|
NET
Pvt. Ltd.
|
||||||||||||||
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|||||||
|
Date
|
Particulars
|
L.F
|
Rs.
|
Date
|
Particulars
|
L.F
|
Rs.
|
|||||||
|
June15
|
To Sales A/c
|
|
4,200
|
|
|
|
|
|||||||
|
|
To Output VAT A/c
|
|
420
|
|
|
|
|
|||||||
|
Sales
Account
|
||||||||||||||
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|||||||
|
Date
|
Particulars
|
L.F
|
Rs.
|
Date
|
Particulars
|
L.F
|
Rs.
|
|||||||
|
|
|
|
|
End of the month
|
By Sundries as
per Sales Day Book.
Rs.(4,000 – 200 +
400)
|
|
4,200
|
|||||||
|
Output
VAT Account
|
||||||||||||||
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|||||||
|
Date
|
Particulars
|
L.F
|
Rs.
|
Date
|
Particulars
|
L.F
|
Rs.
|
|||||||
|
|
|
|
|
End of the month
|
By Sundries as per
Sales Day Book
|
|
420
|
|||||||
Note: Sales Tax is calculated on net price
8.3.4 Purchase Return Book
a)
The goods purchased on credit may be returned by
the purchaser for some reason (defective or not according to sample or
description). Such returns are recorded in Purchase Return Book, (also known as
Returns Outward Book).
Posting:
The
individual amounts are posted to the debit of supplier’s accounts as “ To Purchase
Returns A/c.” and the total of Purchases Returns book is posted to the credit
of Purchases returns account as “ By Sundries as per Purchase Return Book”.
b)
In
case of return by cash, the entry will be as follows-
|
Cash A/c
|
Dr.
|
|
To Purchase Return A/c
|
|
Example
: Record the following
transactions in Purchases Return book and post them into ledgers.
|
2009
June 20
|
Returned to Poddar Electric Co. – 1 Electric Fan @ Rs.800 each (10%
Trade Discount was allowed, which is to be adjusted)
|
|
June 25
|
Returned to Sony Electric Co.- 1 Electric Heater @ Rs.285 each
|
Solution:
Purchase
Return Book
|
Date
|
Particulars
|
Invoice
No.
|
L.F
|
Details
(Rs.)
|
Amount
(Rs.)
|
|
2009
June 20
|
Poddar electric Co.
1Electric Fan @
Rs.800 each
|
|
|
800
|
|
|
|
Less: Trade
Discount @ 10%
|
|
|
80
|
720
|
|
June 25
|
SONY Electric Co.
1 Electric Heater @ Rs.285
each
|
|
|
|
285
|
|
|
|
|
|
|
1,005
|
Ledgers
|
Poddar
electric Co.
|
|||||||
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|
Date
|
Particulars
|
L.F
|
Rs.
|
Date
|
Particulars
|
L.F
|
Rs.
|
|
June20
|
To Purchase
Return A/c
|
|
720
|
|
|
|
|
|
Sony
Electric Co.
|
|||||||
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|
Date
|
Particulars
|
L.F
|
Rs.
|
Date
|
Particulars
|
L.F
|
Rs.
|
|
June25
|
To Purchase
Return A/c
|
|
285
|
|
|
|
|
|
Purchase
Returns Account
|
|||||||
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|
Date
|
Particulars
|
L.F
|
Rs.
|
Date
|
Particulars
|
L.F
|
Rs.
|
|
|
|
|
|
End of the month
|
By Sundries as
per Purchase Return Book
|
|
1,005
|
8.3.5 Sales Return
Book
a)
Goods
sold on credit returned by the customer for some reason (defective or not according to
sample or description) returned
by the customer. Such returns are recorded in Sales Returns Book, also known as
Return Inward Book.
Posting: The individual amount in the sales returns book will be posted in the
respective customer’s account in the credit side as “ By Sales Return A/c.” and
the total of the Sales Returns Book will be posted to the debit side of Sales
Returns Account as “ To Sundries as per Sales Returns Book”.
b)
In
case of return by cash, the entry will be as follows-
|
Sales Return A/c
|
Dr.
|
|
To Cash A/c
|
|
Example
: Record the following
transactions in Purchases Return book and post them into ledgers.
|
2009
June 20
|
Returned from NET
Pvt. Ltd. - 1 Electric Heater @ Rs.418.
|
Solution:
Sales
Return Book
|
Date
|
Particulars
|
Invoice
No.
|
L.F
|
Details
(Rs.)
|
Amount
(Rs.)
|
|
2009
June 20
|
NET Pvt. Ltd.
1Electric Heater @
Rs.418.
|
|
|
|
418
|
Ledgers
|
NET
Pvt. Ltd.
|
||||||||||||||
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|||||||
|
Date
|
Particulars
|
L.F
|
Rs.
|
Date
|
Particulars
|
L.F
|
Rs.
|
|||||||
|
|
|
|
|
June20
|
By Sales Return
A/c
|
|
418
|
|||||||
|
Sales
Return Account
|
||||||||||||||
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|||||||
|
Date
|
Particulars
|
L.F
|
Rs.
|
Date
|
Particulars
|
L.F
|
Rs.
|
|||||||
|
End of the month
|
To Sundries as
per Sales Return Book
|
|
418
|
|
|
|
|
|||||||
8.3.6 Journal Proper
Journal Proper is
used for recording other transactions which are not recorded in any of the Subsidiary
Books of original entry.
Such transactions may be related to (i) Opening
entries, (ii) Closing entries, (iii) Transfer entries, (iv) Rectification
entries, (v) Adjusting entries, and (vi) Miscellaneous entries.
8.3.6.1 Opening Entries: Balances of personal and real accounts of
old books are recorded in the books of New Financial Year. Opening Entries are
used to open the records of assets, liabilities and capital appearing in the
Balance Sheet at end of the previous year.
Example:
Balance
Sheet of X and Y Ltd.
As
on 31.3.2010
|
Liabilities
|
Rs.
|
Assets
|
Rs.
|
|
Capital
|
1,80,000
|
Land and Building
|
95,000
|
|
Sundry Creditors
|
50,000
|
Plant and Machinery
|
70,000
|
|
Outstanding Salaries
|
20,000
|
Furniture
|
40,000
|
|
|
|
Stock-in-trade
|
30,000
|
|
|
|
Cash-in-hand
|
5,000
|
|
|
|
Cash-at-Bank
|
10,000
|
|
|
2,50,000
|
|
2,50,000
|
You are required to pass the opening entry.
Solution:
Journal Proper
|
|
|
|
|
Dr.
|
Cr.
|
|
Date
|
Particulars
|
|
L.F.
|
Rs.
|
Rs.
|
|
2010,
Jan. 1
|
Land and Building A/c
|
Dr.
|
|
95,000
|
|
|
|
Plant and Machinery A/c
|
Dr.
|
|
70,000
|
|
|
|
Furniture A/c
|
Dr.
|
|
40,000
|
|
|
|
Stock-in-trade A/c
|
Dr.
|
|
30,000
|
|
|
|
Cash-in-hand A/c
|
Dr.
|
|
5,000
|
|
|
|
Cash-at-Bank A/c
|
Dr.
|
|
10,000
|
|
|
|
To Sundry Creditors A/c
|
|
|
|
50,000
|
|
|
To Outstanding Salary A/c
|
|
|
|
20,000
|
|
|
To Capital A/c
|
|
|
|
1,80,000
|
|
|
(The last year’s balances brought forward)
|
|
|
|
|
8.3.6.2 Closing Entries: At the end of financial year, Balances of nominal
accounts are transferred to trading and profit and loss account. Such entries
are called closing entries.
Example: Pass closing journal entries from the following Trial Balance in the
books of S & Sons on 31st
Dec., 2009
|
Heads of Account
|
Dr. (Rs.)
|
Cr. (Rs.)
|
|
Stock
|
2,000
|
|
|
Machinery
|
18,000
|
|
|
Purchases
|
30,000
|
|
|
Wages
|
4,000
|
|
|
Discount
|
1,000
|
|
|
Salaries
|
7,000
|
|
|
Office Expenses
|
2,000
|
|
|
Depreciation
|
1,000
|
|
|
Sales
|
-
|
50,000
|
|
Commission received
|
-
|
1,500
|
|
Capital
|
|
14,500
|
|
Carriage Outward
|
600
|
|
|
Carriage Inward
|
400
|
|
|
|
66,000
|
66,000
|
Closing Stock Rs.3, 000
Solution:
In the books of S & Sons.
Journal Proper
Date
|
Particulars
|
|
L.F.
|
Dr.
Rs.
|
Cr.
Rs.
|
|
2009
|
|
|
|
|
|
|
Dec.31
|
Trading A/c
|
Dr.
|
|
36,400
|
|
|
|
To Stock A/c.
|
|
|
|
2,000
|
|
|
To Purchases A/c.
|
|
|
|
30,000
|
|
|
To Wages A/c.
|
|
|
|
4,000
|
|
|
To Carriage Inward A/c.
|
|
|
|
400
|
|
|
(Transfer of
respective account balances to Trading A/c.)
|
|
|
|
|
|
|
Sales A/c
|
Dr.
|
|
50,000
|
|
|
|
To Trading A/c
|
|
|
|
50,000
|
|
|
(Transfer of
Sales to Trading A/c.)
|
|
|
|
|
|
|
Closing Stock
A/c.
|
Dr.
|
|
3,000
|
|
|
|
To Trading A/c
|
|
|
|
3,000
|
|
|
(Value of
stock-in-hand on the closing date of the year)
|
|
|
|
|
|
|
Trading A/c
|
Dr.
|
|
16,600
|
|
|
|
To Profit & Loss A/c
|
|
|
|
16,600
|
|
|
(Transfer of
Gross Profit to Profit & Loss A/c.)
|
|
|
|
|
|
|
Profit & Loss
A/c
|
Dr.
|
|
10,000
|
|
|
|
To Discount
|
|
|
|
1,000
|
|
|
To Salaries A/c.
|
|
|
|
7,000
|
|
|
To Office Expenses A/c.
|
|
|
|
2,000
|
|
|
(Transfer of the
above-mentioned indirect expenses to Profit & Loss A/c.)
|
|
|
|
|
|
|
Profit & Loss
A/c
|
Dr.
|
|
1,000
|
|
|
|
To Depreciation A/c
(Transfer of
depreciation to Profit & Loss A/c.)
|
|
|
|
1,000
|
|
|
Commission A/c
|
Dr.
|
|
1,500
|
|
|
|
To Profit and Loss A/c.
|
|
|
|
1,500
|
|
|
(Transfer of other
revenue income to Profit & Loss A/c.)
|
|
|
|
|
|
|
Profit and Loss
A/c
|
Dr.
|
|
7,100
|
|
|
|
To Capital A/c.
|
|
|
|
7,100
|
|
|
(Transfer of net
Profit to Capital A/c.)
|
|
|
|
|
|
|
Gross
profit=Rs.(53,000-36,400)=Rs.16,600
|
|
|
|
|
|
|
Net
Profit=(16,600+1,500-11,000)=Rs.7,100
|
|
|
|
|
8.3.6.3 Transfer Entries: When one amount is transferred from one account to
another account, the entry made for this purpose is called a transfer entry.
For example, the drawings made by the proprietor are transferred at the end of
the year from Drawings A/c to Capital A/c.
Example:
The
amount of Rs.1,00,000 is to be transferred to General Reserve out of Profit at
the end of the year. The entry will be in Journal proper as follows:-
Journal Proper
|
|
|
|
|
Dr.
|
Cr.
|
|
Date
|
Particulars
|
|
L.F.
|
Rs.
|
Rs.
|
|
Closing Date
|
Profit & Loss A/c
To
General Reseve A/c
|
Dr.
|
|
1,00,000
|
|
8.3.6.4 Rectification entries: When some mistake is committed in
accounting record, the same is corrected by passing an entry in Journal Proper.
If
it is not possible to locate the errors, the amount of difference in the trial
balance is put in an account temporarily known as “Suspense Account" until
that error is located.
Adjusting Entries: At the end of
the year, it becomes necessary to make entries for adjustments. For Prepaid
Expenses, Outstanding Expenses, Depreciation, etc.
Examples: Out of total
salary of Rs.4,000, Rs.3,000 has been paid and Rs.1,000 remains outstanding and
the outstanding amount of Rs.1,000 will be recorded in journal proper.
|
Salary
A/c
|
Dr.
|
1,000
|
|
|
To Outstanding
Salary A/c
|
|
|
1,000
|
Miscellaneous
Entries: In addition to
all the items discussed above remaining items are included in miscellaneous
list, like dishonored bills, purchase of assets on credit, etc.
8.3.4 Other Subsidiary Books
1.
Consignment
Outward Book: Some
businessmen send their goods to Agents, which is sold by them, on risk and on
behalf of the businessman. The businessman keeps record of these goods in a
book which is called ‘Consignment outward book.”
2.
Credit
Collection Day Book: Amount
received from their customers is recorded in this book. In the evening, record
in the cashbook is made from this book.
Specimen of Credit Collection Day Book
|
Date
|
Particulars
|
Receipt No.
|
L.F.
|
Discount
|
Cash
|
Remarks
|
|
|
|
|
|
|
|
|
3.
Daily
Cash Sales Book: Some
businessmen keep a daily cash sales book in which all the cash sales of each
day are recorded. At the end of day, posting is made from this book. The contents
are similar to Sales Book, except that name of the customer is not recorded.
Total amount received is posted into Cash A/c
Specimen of Daily Cash Sales Book
|
Date
|
Cash Memo No.
|
Amount
|
Remarks
|
|
|
|
|
|
